Is “Remarkable Indonesia” the New “Incredible India” for Investors?

I’ve written several posts about the innovation, entrepreneurship and promising Web audience I’ve found over several weeks of reporting in Indonesia. As such, friends in the venture capital business are peppering my inbox asking round-about-questions that all go back to the same central query: Should we be investing in Indonesia?
The seatback pocket on my flight from Jakarta to Surabaya seemed to think so. A pamphlet blared “INVEST IN REMARKABLE INDONESIA,” and included some testimonials from companies like Coca-Cola and Unilever, and some charts showing Indonesia’s economic stability. This was the second time I’d heard the words “Remarkable Indonesia” in as many days. Dino Patti Djalal, the spokesperson for Indonesia’s President Susilo Bambang Yudhoyono and soon to be Ambassador to the US said they’d trademarked it as the country’s new marketing tagline. It called to mind the “Incredible India” push of a few years ago which even included purchasing ads during the Oscars.

Compared to “Incredible India,” “Remarkable Indonesia” seems to express muted praise for the country—especially considering the infrastructure in Jakarta was far better than the infrastructure I found in most major Indian cities, the food cooked with some 30,000 locally grown spices was amazing, the cultural heritage and diversity was just as rich, and Bali has some of the most beautiful beaches anywhere in the world. Only remarkable?

The biggest reason for Valley-types to think about investing in Remarkable Indonesia wasn’t in that pamphlet. It’s the fact that for all the promise and nascent bubbling growth in technology and mobile, almost no one is there. Indonesia has 240 million people and a Web audience around 30 million to 40 million people, not including the surging mobile Web. It’s curious how little venture capital is going after that, given that in the first quarter nearly $1 billion in US startup funding flowed to India, China and Israel, with each country reporting surges in capital from between 20% to more than 100% over the last year.

This post is one that many people in South Africa, India and China have begged me not to write, because they are having a field day expanding mobile and Web services in Indonesia. In this age of global venture capital and emerging markets hype, how many markets this big is the US mostly ignoring? In this age of globalization and outsourcing, how many markets this big have so few multinational jobs driving up employment and developer costs?

But all of this opportunity doesn’t necessarily mean Indonesia is a market where US venture capitalists can do well. Recently Indonesian tech blogger Rama Mamuaya was cold-called by a Valley venture firm and asked if he had a million dollars to invest in one Indonesian Web startup, which one he should pick. He thought about it and answered: None. It’s not because they aren’t promising, but because the costs of building a company are still so low in Indonesia—as opposed to markets like China and India where a flood of multinational jobs have pushed up salaries and rents—that any company would have a hard time putting that much money to good use.

There are concerns about politics, stability, the banking system and, of course, how to get liquidity as there are with most emerging markets. There’s especially a visceral fear in Indonesia—a country that was brought to its knees by the late 1990s Asian financial crisis, and one that most Americans know very little about. These are not waters to be navigated from thousands of miles away.

I think what Indonesia could use is something in between the current state of no high-growth capital and the money that goes to countries like India and China: A Y-Combinator-style incubator that could help Indonesian entrepreneurs make sense of the pitfalls of modern startup life, including things like recruiting and managing talent, how to deal with Silicon Valley giants, how to make money online and when and when not to raise outside funding. The funding amounts and exits would be small, but a Yossi-Vardi-style angel could clean up where many classic VCs might crush startups under the weight of millions. Someone to coax these entrepreneurs as they develop organically, but not bind them to a Western-way of building companies. Someone local–or at least transplanted fully– who understands when all those Valley rules need to be modified or broken.

In the Valley, the ecosystem for starting companies grew organically over several decades, a luxury that China and India didn’t have. Those countries have entrepreneurs, they have tons of venture capital and big market opportunities—but when they got flooded with American cash in the last decade, the ecosystem’s natural development accelerated, and the step of developing local angels and mentors was largely skipped. That’s the single biggest complaint I hear from entrepreneurs in these countries. Indonesia has a rare opportunity to develop a huge startup ecosystem in the right order.

The question is who will fill this void, because someone will. Will it be an American who moves and becomes embedded in the market? Or will it be a branch of a firm that’s sprung up in recent years in China or India, places that understand emerging market economics and risk better than we do? It’s not going to be easy, but Indonesia is too big and too untapped—too “remarkable”–to stay undiscovered forever.